THE MEDIA BUSINESS: ADVERTISING

THE MEDIA BUSINESS: ADVERTISING; The seemingly never-ending inflation in the cost of network sports contracts may be near an end.

By Richard Sandomir

Published: February 14, 2002

THE News Corporation's decision to write down $909 million in sports television programming for its Fox network on Tuesday may halt the recent inflation in the cost of broadcast network sports contracts, industry analysts said.

''It's a clear signal that the broadcast networks are tapped out for any significant rights-fee increases in future years,'' said Neal Pilson, a sports industry consultant who is a former president of CBS Sports.

The write-down, which caused the company to post a $606 million second-quarter loss, was divided among the company's contracts with the National Football League, Nascar and Major League Baseball.

With four years left on its N.F.L. agreement, the News Corporation wrote down $387 million. The value of the Nascar deal, with seven years left, was reduced by $297 million. The deal with Major League Baseball, with four years remaining, was written down by $225 million.

The write-down amounts to 15.9 percent of the $5.7 billion left on the contracts with the three sports, based on the annual value of the agreements. In writing down the contracts, the company said that it had overpaid when it made the deals and that it could no longer meet its revenue projections in the continuing advertising market recession, which worsened after the Sept. 11 terrorist attacks.

''We signed these contracts in a different economy, using assumptions that are no longer viable,'' Peter Chernin, the president and chief operating officer of the News Corporation, said on Tuesday.

The company anticipates small advertising revenue increases that cannot fully support its financial obligations to the three sports.

David DeVoe, the company's chief financial officer, added, ''On the N.F.L. broadcasts, it will take until fiscal 2004 to achieve the revenues of the last fiscal year.''

The latest write-down is the News Corporation's second major one in sports. In 1995, a year after it began carrying N.F.L. games, the company wrote down $350 million under a contract worth $1.58 billion.

Several years before, CBS wrote down nearly half of the value of its $1.06 billion baseball contract.

In the current market, the News Corporation is the only network owner with major sports properties that has written down investments in sports like football.

The Walt Disney Company owns ABC and ESPN, and Viacom owns CBS.

''If Disney thinks the economy will grow at 5 percent and Fox only thinks it will grow 3 percent, then maybe Disney thinks they will generate sufficient revenues to cover its losses, at least for now,'' Mr. Pilson said.

Brian Schechter, an analyst for Kagan Worldwide, suggested that stockholders would ultimately decide whether companies should continue to ratchet up the cost of sports television contracts.

''There comes a time when you have to ask yourself: If it's not about ratings, demographics or advertising, what is it about?'' Mr. Schechter said. ''Where's the beef?''

In recent years, the NBC Sports unit of General Electric has walked away from N.F.L. and baseball deals, and in late December it elected not to continue its 12-year relationship with the National Basketball Association.

Eventually, ABC, ESPN and AOL Time Warner's Turner Sports signed a six-year deal worth $4.6 billion with the N.B.A.

Under those contracts, fewer games will be seen on broadcast television and substantially more will be on cable, which has the advantage of having revenue streams from both advertising and subscriber fees. Broadcast television has only advertising revenue.

''It's been clear since 1993 that the game changed from thinking about turning a profit to someone buying for brand identity,'' said Dick Ebersol, the chairman of NBC Sports, referring to Fox's N.F.L. deal, which exceeded what any network had ever paid for the sport.

''Once that happened, you were on a slippery slope to losing a lot of money.''

Photo: Nascar broadcasts are part of the sports ventures written down recently by the News Corporation, which said it had paid too much for the rights. (Associated Press)